Real Estate Math
A Texas commercial property sold for $1,800,000. The net operating income (NOI) is $126,000. What capitalization rate was implied by the sale?
A7%✓ Correct
B8%
C6%
D7.5%
Explanation
Implied Cap Rate = NOI / Sale Price = $126,000 / $1,800,000 = 0.07 = 7%. This is also called the going-in cap rate—the cap rate at which the investor purchased the property based on the income at the time of purchase.
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